Greenspan Says Fannie,
Freddie Need to Shrink

Federal Reserve Chairman Alan Greenspan reiterated his recommendation that Fannie Mae and Freddie Mac be forced to shrink their mortgage portfolios, saying the holdings are so huge that they threaten the market for sophisticated financial instruments known as derivatives.

Together, Fannie and Freddie hold about $1.5 trillion in residential mortgages -- portfolios they manage through extensive use of "swaps," derivatives used...